EAST LANSING, Mich. (Michigan News Source) – After years of legal battles over athlete compensation, the NCAA (National Collegiate Athletic Association) has agreed to a settlement. A landmark antitrust lawsuit, House v. NCAA, has led to a jaw-dropping $2.8 billion settlement, officially opening the floodgates for college athletes to be paid directly by their universities. What was illegal a week ago is now the new business model.
Starting July 1, universities can begin cutting checks to student-athletes directly, with an initial annual revenue-sharing cap of $20.5 million per school for the 2025-26 academic year – and they can distribute the funds any way they want.
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Gone are the days of NIL (name, image and likeness) collectives being the only sugar daddies in town. Now schools can also write the checks – and manage the fallout. The revenue-sharing model doesn’t eliminate NIL – it just adds more fuel to payout fire.
A newly formed College Sports Commission will play referee, overseeing how schools navigate the new playbook on revenue sharing, roster limits, and those ever-lucrative third-party NIL deals.
What is an NIL collective?
An NIL collective is an independent organization that pools funds from donors, boosters, businesses, and fans to facilitate NIL opportunities for college athletes. These groups, often founded by alumni or supporters, operate separately from universities but support athletes at specific schools by arranging paid endorsements, appearances, social media promotions, or charitable activities.
Who does the $2.8 billion go to?
The $2.8 billion settlement money will go to current and past players from the last 10 years who missed out on opportunities to reap the financial benefits from their name, image, and likeness.
Michigan’s AD Warde Manuel chimes in.
Over at the University of Michigan (U-M), Athletic Director Warde Manuel struck a calm tone about the settlement saying, “These changes have been a tremendous undertaking for our department, but we know they are just the beginning. We ask for your continued support.”
Michigan State’s new athletic director speaks out.
New Michigan State University (MSU) Athletic Director J. Batt, who is officially starting his job the week of June 15, issued a letter calling the settlement “transformative” and emphasized “alignment” as the key to MSU’s success. He also echoed the statements by U-M’s Manuel about extra work being involved saying, “This new era of college athletics will require additional resources and provide new challenges daily.”
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MSU is reportedly planning to dish out the full $20.5 million allowed to its athletes – and with scholarship limits scrapped, there’s even more flexibility in how they build their teams. The catch? Schools now have to play within newly imposed sport-specific roster limits.
Under the new NCAA settlement, schools that choose to pay athletes must follow new roster size limits for each sport – basically, caps on how many players can be on each team. There’s no longer a limit on how many scholarships a school can give, as long as they don’t go over the roster cap. Schools can “grandfather in” current athletes so they don’t count toward the cap – but only if they declare that by July 6. After that, teams must stick to the new limits.
According to a Yahoo! Sports article, they predict around 5,000 NCAA athletes will be cut because of roster limits.
Who gets paid and who gets benched?
Experts also predict Olympic and non-revenue sports like rowing, volleyball, and track may face cuts – because someone’s got to pay the football team’s new allowance.
A lot of schools don’t make $20.5 million in total revenue from all their sports combined. Since football and men’s basketball bring in the most revenue and attention, schools will likely prioritize paying those athletes first. To cover the cost, schools might cut back on Olympic and non-revenue sports that don’t generate profit but still cost a lot to run. In short, to afford football’s new paycheck, other teams may get benched.
Not everything is rosy – and there is a legal speed bump.
In addition to players and programs possibly getting cut, there’s also a group of female athletes who are not happy about the settlement. Eight female athletes have filed an appeal, arguing the settlement’s payout structure violates Title IX by disproportionately favoring male athletes in revenue-generating sports like football and basketball.
Attorneys for the group assert that women athletes are being shortchanged by about $1.1 billion, a figure they say stems from a flawed calculation that ignores federal gender equity laws. Clune and Hare, attorneys who are representing the group, have noted that roughly 90% of the $2.8 billion in payouts is expected to go to male college football and basketball players – a reflection of the significantly higher commercial revenue generated by men’s programs compared to women’s teams.
The appeal has temporarily frozen payouts to former athletes while the U.S. Court of Appeals reviews the case. However, schools can still proceed with plans to begin paying current athletes starting July 1.
Critics of the appeal warn that this legal challenge could delay compensation for hundreds of thousands of former student-athletes by months – or even years.
Show us the money: Michigan schools scramble to set up athlete pay.
For now, it’s a mad dash for Michigan’s schools to build out new payment infrastructures before kickoff on August 23. Because one thing is clear: the era of free labor in college sports is officially over. Now it’s just a question of who gets paid – and how much.
